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David Miliband, the former UK foreign secretary, has called for an end to the refugee camp system and the reform of humanitarian institutions “that were designed for yesterday’s problems, not tomorrow’s”.

The Liberal Democrat leader, Tim Farron, has accused the government of preparing to use international aid money to “plug black holes” in the defence budget, after reviews of defence and aid spending signalled that more funds would be channelled from the Department for International Development (DfID) to projects in other departments.

At least half of the UK’s £12bn aid budget will be spent on supporting fragile and failing states, David Cameron has said ahead of the spending review in a major foreign policy speech at the lord mayor’s banquet.

Britain is suffering a crisis of confidence in foreign policy that leaves it “sidelined in Syria, ineffective in Ukraine, unwilling in Europe, and inimical towards refugees”, a report by some of Britain’s most senior former diplomats, intelligence officers and foreign policy academics has warned.

David Cameron’s hopes of parachuting senior Tory Andrew Lansley into a top UN humanitarian role have hit snags amid an increasingly bitter “jobs for cronies” row that threatens to impact on Britain’s diplomatic standing.

Hundreds of millions of pounds of British public funds have been handed over without proper scrutiny to an aid agency accused of funding international criminals, according to a report published on Thursday by parliament’s spending watchdog.

Charities working in crisis-hit regions are failing to receive millions of pounds in funding because of banks’ fears of incurring tough penalties for failing to stop the flow of terrorist funds and money laundering, according to a report.

George Osborne was drawn into a confrontation with Britain’s leading tax and spending experts after the Institute for Fiscal Studies said he had a duty to spell out his deficit reduction plans and warned of cuts on a “colossal” scale.

The richest 1% of the world’s population are getting wealthier, owning more than 48% of global wealth, according to a report published on Tuesday which warned growing inequality could be a trigger for recession.

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David Miliband, the former UK foreign secretary, has called for an end to the refugee camp system and the reform of humanitarian institutions “that were designed for yesterday’s problems, not tomorrow’s”.

The Liberal Democrat leader, Tim Farron, has accused the government of preparing to use international aid money to “plug black holes” in the defence budget, after reviews of defence and aid spending signalled that more funds would be channelled from the Department for International Development (DfID) to projects in other departments.